Industry Group Opposes Class Action Settlement

As hearings begin on Microsoft's antitrust class action settlement Tuesday, an industry trade association urges the judge to dismiss the agreement involving an education giveaway as meaningless to Microsoft and compoundly anticompetitive.

Microsoft last week entered into an agreement with lawyers filing more than 100 class action lawsuits based on the antitrust case. Under the agreement, Microsoft would pay $250 million for computer purchases and $250 million for technical support and teacher and administrator training at the nation's poorest schools.

Microsoft called the agreement a $1 billion settlement. Half of that value is the cost of Microsoft software at academic prices.

The Computer & Communications Industry Association (CCIA) on Monday submitted a letter to U.S. District Judge J. Frederick Motz in Baltimore arguing that Microsoft's estimates of the value of its software are extremely bloated and that the agreement would extend Microsoft's monopoly to education.

"In addition to failing to provide remediation to the plaintiffs in this case, the settlement before you would do nothing to deter future anticompetitive conduct by Microsoft and would inflict great harm upon the technology markets affected by such conduct," wrote Edward Black, CCIA president and CEO. Major members of the CCIA, a Washington, D.C.-based lobbying group, include Oracle, Sun Microsystems, AOL, AT&T, Yahoo, Hitachi, Amdahl and Fujitsu.

Black's letter also asks the judge to consider excluding class action lawsuits filed in California and the other states that rejected the Department of Justice settlement with Microsoft from the combined class action settlement if the judge does not reject the settlement outright.

"For a company that generates profits upwards of $1 billion each month, and retains cash holdings of approximately $35 billion, disgorgement of $500 million is nothing more than a hiccup on the balance sheet -- a negligible cost of doing business," Black writes.

"The marginal cost of providing free software is virtually nonexistent as well -- most of the costs in producing software are attributable to the development costs, and production costs -- particularly in the age of the Internet -- are miniscule. Therefore, forcing Microsoft to provide free software to schools can hardly be considered a significant punishment."

The CCIA letter continues, "Furthermore, the court-ordered distribution of free software would be tantamount to judicially sanctioned predatory pricing by a monopolist in a critical market."

Black contends the settlement agreement will hurt Apple, one of the only client operating system competitors left, in its stronghold of the education market.